Denver Mayor and City Council Joint Meeting on Budget and Personnel Updates - August 12, 2025

The weekly joint meeting of Denver Mayor Mike Johnston and City Council on August 12, 2025, focused on the city's fiscal challenges and the administration's plan to address a projected $200 million budget gap for 2026. The Mayor opened with remarks on the difficulty of balancing the budget while protecting employees and residents. Budget and HR officials presented economic data, layoff procedures, and severance proposals. Council members asked detailed questions about revenue forecasts, fund balance, layoff criteria, and support for affected employees. The meeting was informational; no votes were taken.

Public Comments & Testimony

• No public comments were heard during this session.

Discussion Items

Opening Announcements

• Councilwoman Flynn noted her 21st wedding anniversary. - Councilman Flynn announced that his late brother received a posthumous Prometheus Award from the Libertarian Futurist Society; he will give the acceptance speech via Zoom. - Councilwoman Sawyer reminded of a free symphony in the park event on August 16 at Bible Park, starting at 4:00 PM with food trucks and a park dedication. - Council President Pro Tem announced a movie in the park at Zuni Park on Friday and free yoga at Elitch's on Wednesday. - Councilman Watson invited the public to monthly community office hours on Monday, August 18, from 10:30 AM to 11:30 AM at Rivers and Roads, 2539 Bruce Randolph Avenue.

Budget and Economic Update

• Justin Sykes, Budget Director, reported that economic growth is slowing and trade tariffs have raised the effective U.S. tariff rate from 3% in December 2024 to about 20% currently. Denver's sales tax revenue is projected to be $25 million lower in 2026 due to tariffs. - June 2025 sales tax activity was down 0.4% compared to June 2024 ($76 million). General fund revenue growth for 2025 is revised to 0.3%, and 2026 revenues are expected to be lower than 2025. - The gap between baseline 2026 expenditures and projected revenues is approximately $200 million. General fund reserves were $239 million at the end of 2024; if left unaddressed, the gap would nearly wipe out reserves. The city expects to end 2025 with a fund balance between 10% and 11% (down from 11.2% in April). - Severance package: affected employees will receive 30 days paid administrative leave, 2-8 weeks severance lump sum, health insurance through October, and 120 days of Employee Assistance Program access. - Layoff criteria: four categories (skills, abilities, performance, years of service) with years of service fixed at 25% weight. Agencies choose weights for the other three before receiving the ranking tool, which is reviewed by OHR Executive Director Kathy Nesbitt and city attorneys. - Heather from OHR noted that the ranking tool uses a five-step rating scale (exceptional to unsuccessful) based on job descriptions. Agencies first eliminate vacant positions and probationary employees before using the ranking tool on filled positions. - Council questions and concerns: - Councilwoman Sawyer asked about the precision of the 0.3% revenue growth estimate versus 0%, noting it affects job savings. Sykes acknowledged that zero growth is used for 2026 budget planning. - Councilman Watson requested state/federal growth comparisons and more clarity on fund balance movement from 11.2% to 11%. - Councilwoman Gonzalez Gutierrez asked why non-general fund employees are subject to furloughs and whether state grants might be reduced. The Mayor responded that furloughs are applied equally across all employees and that the city has no indication or history of state grant reductions due to furloughs. She also expressed concern that the administration has not presented a clear process for evaluating city contracts and projects for savings. - Councilman Flynn questioned the fairness of different weightings across departments; Heather explained that weights are set before the tool is used to prevent back-door targeting. - Councilwoman Alvidrez requested demographic information on those affected by layoff criteria and care bank rule changes, and asked about the ranking tool. She also expressed confusion about revenue figures for 2023-2024. - Councilman Cashman asked whether years of service for council aides who moved to other city agencies include only agency time; Heather said she would follow up. - Councilman Torres thanked the team and asked about ARPA-funded staff (fewer than 10) and contract inflation. - Council President Pro Tem asked about how critical positions are determined (agencies decide beforehand) and whether the ranking tool accounts for vacancies (vacancies are eliminated first). - Councilwoman Sawyer later requested a future Mayor-Council discussion on administration policies for requiring contracts to go back to RFP to achieve savings.

Key Outcomes

• No formal votes were taken. The meeting was informational and preparatory for the upcoming budget process. - The administration committed to releasing the 2026 proposed budget by September 15, 2025, including revised fund balance forecasts and detailed revenue breakdowns. One-on-one budget briefings with council members are scheduled for the week of September 8. - The administration acknowledged the need for a long-term plan to restore the fund balance to the 15% target, likely by 2028 or 2029, but did not provide specifics. - Council members requested additional data on revenue sources, fund balance trajectory, contract evaluation policies, and demographic impacts of layoffs to be addressed in future Mayor-Council meetings or budget hearings. - The Mayor urged council members to support department heads who are making difficult decisions and are deeply affected by the layoff process.